SECURITY COLLATERAL ARRANGEMENT OVER RES
INCORPORALES AND THEIR PROVISION BY POSSESSION
AND CONTROL Cover Image

ЗА РЕАЛНОТО ПРЕДАВАНЕ (ПРЕДОСТАВЯНЕ), ВЛАДЕНИЕТО И КОНТРОЛА ПРИ ДОГОВОРИ ЗА ЗАЛОГ С ПРЕДМЕТ RES INCORPORALES
SECURITY COLLATERAL ARRANGEMENT OVER RES INCORPORALES AND THEIR PROVISION BY POSSESSION AND CONTROL

Author(s): Ivan Mangatchev, Alexander Tonev
Subject(s): Law, Constitution, Jurisprudence, History of Law, Civil Law
Published by: Софийски университет »Св. Климент Охридски«
Keywords: EU law; Possesion and control; res incorporales;

Summary/Abstract: This article examines the problems of res incorporales (intangible objects, for example, claims) related to their provision under security collateral arrangements. The starting point of the research is Roman law and its requirements for so-called ‘real contracts' such as mutuum, commodatum, depositum and pignus. It is believed that the real contracts required physical delivery of the object of the collateral. Roman lawyers believed that is impossible "to touch or see" claims or receivables and that was the reason for them to think that the only possible way to provide res inscorporales (claims or receivables) as collateral under security arrangements is quasi possessio. It is also believed that the so-called pignus nominis (security arrangement over claims) was possible by way of pactum or contractus. The ‘real' provision of the security was not possible due to its nature. The next part of research deals with contemporary security financial collateral arrangement regulated by Directive 2002/47/EC. The authors examine The UK leading insolvency case law as Gray v G-T-P Group Ltd, Re F2G Realisations Ltd (in liquidation) [2010] EWHC 1772 (Ch) and Re Lehman Brothers International (Europe) (in administration) [2012] EWHC 2997 (Ch). The decision in the first case held that G-T-P did not have possession or control, because collateral taker (the chargee) did not prevent the collateral provider (the chargor) from dealing with the charged assets, whereas until one of the specified events occurred, which means that G-T-P has not valid financial collateral. The second judgment is Re Lehman Brothers International (Europe) (in administration). It is also held that it would be wrong to limit "possession" in such a way as to exclude any application to intangibles ([2012] EWHC 2997 (Ch), par. 131).It is of interest to point out that if the above mentioned cases were to be decided under Luxembourg legislation the judgments would be different. For example, the case of Gray v G-T-P Group Ltd, Re F2G Realisations Ltd (in liquidation) was about a security interest over cash in a bank account. The judgment held that collateral taker did not exercise enough possession and control over the collateral. In Luxembourg if the pledge is over claims, the transfer of possession is effected as against the debtor and the third parties by the mere conclusion of the pledge contract - Art. 5 (4) Law of 5 August 2005 on financial collateral arrangements (Luxembourg). The judgment of Re Lehman Brothers International (Europe) (in administration) held that dispossession was needed. The financial collateral was financial instruments according to the Master Custody Agreement between LBIE and LBF dated 22nd. of August 2003. It may be supposed that the subject of financial collateral was book entry financial instruments. Again under the laws of Luxembourg if financial instruments are pledged, the transfer of possession of such financial instruments may be done as Art. 5 (2)(a) Law of 5 August 2005 on financial collateral arrangements (Luxembourg) required and without dispossession. It could be seen the possession in the above mentioned Luxembourg legislation differs from common law judgments understanding. The transfer of possession can be achieved only by agreement or book entry registration. The conclusion is that it is not appropriate for national courts to use their own case law in their efforts to reveal the meaning of EU law as is the case with possession and control under Directive 2002/47/EC by using of jurisdiction case law specificities. Gray v G-T-P Group Ltd, Re F2G Realisations Ltd (in liquidation) and Re Lehman Brothers International (Europe) (in administration) relay on older case law dealing with common law problems (as Re Spectrum Plus Limited (in liquidation) [2005] 2 AC 680, Re Cosslett (Contractors) Limited [1998] 2 WLR 131, CA, Queen's Moat Houses Plc v. Capita IRG Trustees Limited [2004] EWHC 868 (Ch), Agnew v Inland Revenue[2001] 2 AC 710 and Re Bank of Credit Commerce International SA (No. 8) [1996] Ch 245). This is in contradiction to the principle of autonomous construction of the rules and terms of the EU law and its predominance over the internal laws of Member States.

  • Issue Year: 2016
  • Issue No: 1
  • Page Range: 850-886
  • Page Count: 37
  • Language: Bulgarian